This auto rating factor could give brokers a headache

British Columbia’s auto insurer has one rating factor that makes sense from an underwriting point of view, but could be onerous for brokers, an insurance defence lawyer suggests.

The Insurance Corporation of British Columbia requires motorists in the province to list anyone who uses their vehicle as little as once a month, the Insurance Bureau of Canada said in a recent release. This requirement could potentially create a make-work project for B.C. brokers, observed Ian Gold, founding partner of law firm Thomas Gold Pettingill LLP, whose practice areas include insurance defence.

“Obviously, the more information [insurers] have, the more accurate their rating and premiums could be,” Gold told Canadian Underwriter. “I understand why [ICBC] would want that information.” But Gold, who lives in Ontario, says it could be onerous on brokers to ask clients to speculate on non-household members who might be driving their car within the next month.

Said Gold: “If I was in B.C. and one of my children called and said, ‘I want to let so-and-so drive my car,’ even though there is this unlisted driver protection up to a certain point, just erring on the side of caution, I would say: ‘No, not until I call my broker and have that person added to the list.’”

Gold says ICBC’s listed driver policy gives the carrier better information on which it can base on auto policy price than if the insurer only knew the records of drivers living in the household. However, it also puts an additional onus on brokers.

“If I was giving advice to somebody, and they called me and said, ‘I want to let so-and-so drive my car,’ the first thing I would say to them is, ‘Call your broker and tell them to add this person to your list. That might affect your premium or it might not.’”

The listed driver policy was characterized in the IBC’s press release as an “uncomfortable fact.”

ICBC is a Crown corporation with a monopoly on mandatory private passenger coverage in the province. IBC is urging the provincial government to let insurers from the private sector compete with ICBC in writing mandatory auto coverage.

Canadian Underwriter asked IBC why a vehicle owner who lets someone with a bad driving record drive their vehicle should not pay more than the owner of a vehicle that is only driven by people with a good driving record.

“When we think about it from a customer standpoint, ICBC is asking drivers to list not just their immediate family members,” said Aaron Sutherland, IBC’s vice president of the Pacific region. “They actually ask you to list your friends, neighbours, your co-workers, the kid down the street – anyone who uses your vehicle as little as once a month.

“That is far beyond what other insurers do, so we are just calling attention to the fact that if you had choice in British Columbia and you could shop around for auto insurance in British Columbia and you didn’t like that system, you could take your business elsewhere. Unfortunately you don’t have that option in B.C.”

In addition, IBC notes, for B.C. motorists, 25% of their premium is based on the driving record of the listed driver with the worst record, said Sutherland.

If a B.C. motorist lets someone drive their vehicle more than 12 times a year, does not provide their name to the insurer, and then that person causes an accident, ICBC penalizes the policyholder. The penalty could be up to $5,000. ICBC calculates the penalty by multiplying the additional amount the insured would have paid to list the driver by 15. For example, if the client is paying $1,000 a year and would have paid $1,100 had an additional driver been listed, then the penalty to the policyholder for an accident caused by the unlisted driver is $1,500 (i.e. the $100 policy difference times 15).

“Drivers in British Columbia still live in a world where most insurance is delivered by a government-run monopoly – one that charges the highest rates in Canada and yet has still lost over $3 billion – that’s billion with a “b” – in recent years,” said Don Forgeron, IBC’s president and CEO, on Sept. 23 during the National Insurance Conference of Canada. “In British Columbia, we’d like to see the end of the ICBC monopoly – and the introduction of choice and competition into the marketplace.”